The Euro will be vulnerable to some further limited selling pressure in the near term due to continuing fears over the eastern European economies and European banking sector with the G7 meetings also not supporting the currency.
The Euro was unable to push above the 1.2950 region on Friday, but resisted a renewed decline below 1.28 as trading ranges were slightly narrower. The Russian rouble maintained a firmer tone which provided some Euro support over the day.
Euro-zone GDP fell 1.5% for the fourth quarter which was a record quarterly decline. The data will reinforce fears over the Euro-zone economy and there will be pressure for additional policy action. There will be further very strong expectations that the ECB will sanction a further significant interest rate cut at the March meeting.
The G7 meetings failed to announce any new significant policy measures with more general comments on the need to tackle the severe downturn. The lack of policy initiatives had some impact in weakening the Euro in Asian trading on Monday. The Euro was also unsettled to some extent by fresh rumours of difficulties in Eastern Europe and a possible downgrading of Ukraine's debt rating while there was also some speculation over an Irish debt default. The Euro dipped towards important support levels just above to 1.27 in Europe before a slight recovery.